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Friday, September 20, 2013

Avoid falling into a Credit Card trap

Most of the people have moved on from paper money to plastic money. Most of them feel great when they use their credit card instead of paper money. We are not aware that 1% to 4% of the revenue generated by bank are from the interest we pay towards the credit card we use. Below i will help you out with the list of things you should be careful while using your credit card.

1. Minimum Amount due: Everyone must have used a credit card and would have got a statement for the outstanding amount to be paid within a specific duration as given by the bank. There are 2 sections of payment, one is total amount due and another is minimum amount due. Most of the new users do not check the Total amount due on their bill and only see the minimum amount due. Because of this people fall into the trap of interest which they need to pay in their next bill along with the purchases they make next month. I would request not to make the payment of Minimum Amount Due as you will be liable to make the payment of interest charged by the bank for not making the Total Amount Due.

2. Easy Monthly Installment (EMI): Rather than falling into making the minimum amount and paying the interest for it, i would suggest you to switch to EMI facility if it is available with your bank on your credit card. Now a days all the Banks are giving an option to convert the purchase amount into an EMI. To opt for an EMI please check the limit with your bank as they have some conditions for it. Also some banks are providing an EMI facility that too with out interest for 3 to 6 months(depends on banks)

For instance: With my credit card bill i received a brochure of getting an EMI facility on some selected brands/ dealers. Hence, I bought a washing machine for rs.10,000/- from one vendor. I called up the customer care of my bank and asked them to convert that transaction into an EMI. Now if i convert the transaction for 3, 6 or 9 months there is no processing fee which depends on banks according to months. Hence I opted for 6 months EMI according to my affordability. So now the EMI every will be 1666.66/1666.67 per month till 6 months with out any interest. But make sure when your bill generates make the total amount outstanding as per the statement, else will be charged interest for making the minimum amount due if you have any other transaction apart from EMI.

3. Cash Withdrawal: Many of customers think that this facility is provided by the bank to withdraw cash. Yes they are correct, but they are not aware that the charges for Cash Withdrawal starts from the time you withdraw cash. There is a one time transaction fee for withdrawing the cash which may by from 2.5% to 4%. Apart from a transaction fee there is also 33% to 40% interest charged annually(2.8% to 4% per month) at the time of bill statement. For more details regarding Cash witdrawal fee, do check the information provided on Moneycontrol.

4. Interest & Fees: Banks do sell a credit card after all verifications required and we accept the same however we not only accept the Credit Card but we also accepts some interests and fees. Many of us are aware Joining fees, renewal fees, interest charges and service charges but there are some charges like Late Payment fees, Cash Advance Trasaction fees, Over-limit charges, Fees on Cash Payment at branch, Outstation Cheque fee, Duplicate Statement request(more than 3 months), Card Replacement, Cheque or Card pickup, Chargeslip request.

So in all would like to recommend you to read the terms and consition before getting into buying any credit card. Now a days all banks do give a verification call after you recieve a new card and inform you about the features and charges of the Credit Card you hold, hence you can clarify your doubt on phone with them and take necessary steps. Also a suggestion to always check your current Card bill/ statement and make the full payment rather than going for the minimum payment to avoid charges. Always make the payment on time or before to avoid Late Payment charges. Also consult your customer care executive on phone or in bank about the pros and cons of cash withdrawal facility.

I Hope now most of us will not have a problem regarding using a credit card freely and easily.